High-Low Method

Ziegler Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:

Units Produced			Total Costs
1,900			$376,200
3,720			567,230
5,700			585,200

a. Determine the variable cost per unit and the total fixed cost.

Variable cost: (Round to the nearest dollar.)	$ per unit
Total fixed cost:	$

b. Based on part (a), estimate the total cost for 2,740 units of production.

Total cost for 2,740 units:

$

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For a recent year, McDonalds (MCD) company-owned restaurants had the following sales and expenses (in millions):

Sales	$16,900
Food and packaging	$(6,699)
Payroll	(4,300)
Occupancy (rent, depreciation, etc.)	(2,891)
General, selling, and administrative expenses	(2,500)
	$(16,390)
Operating income	$510

Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.

a. What is McDonald's contribution margin? Round to the nearest million. (Give answer in millions of dollars.) $ million

b. What is McDonald's contribution margin ratio? %

c. How much would operating income increase if same-store sales increased by $1,000 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million. $ million